EX-10.1





Exhibit 10.1



EMPLOYMENT AGREEMENT



This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of May 2, 2008
(the “Effective Date”), by and between WARWICK VALLEY TELEPHONE COMPANY (the
“Company”) and DUANE W. ALBRO (“Executive”).





	1.	 	Employment.




The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed by the
Company, upon the terms and subject to the conditions set forth in this Agreement.





	2.	 	Term of Employment.
	 
	(a)	 	The period of Executive’s employment under this Agreement shall begin as of the Effective
Date and shall continue until April 30, 2010 (the “Initial Term”), and shall be
renewed automatically for successive one-year periods thereafter (each, a “Renewal
Period”), unless Executive or the Company gives written notice of nonrenewal to the other
at least sixty (60) days before the expiration of the Initial Term or any subsequent Renewal
Period.
	 
	(b)	 	Notwithstanding the foregoing, Executive’s employment may be terminated by the Company or by
Executive at any time for any reason.
	 
	(c)	 	As used in this Agreement, the term “Employment Term” refers to Executive’s period of
employment from the Effective Date until the date his employment terminates.
	 
	3.	 	Duties and Responsibilities.
	 
	(a)	 	The Company will employ Executive as its President and Chief Executive Officer. In such
capacity, Executive shall perform the customary duties and have the customary responsibilities
of such positions and such other duties as may be assigned to Executive from time to time by
the Board of Directors of the Company (the “Board”). Executive will exercise his
judgment in accordance with the highest ethical standards.
	 
	(b)	 	Executive agrees to faithfully serve the Company, devote his full working time, attention and
energies to the business of the Company, its subsidiaries and affiliated entities, and perform
the duties under this Agreement to the best of his abilities.
	 
	(c)	 	Executive agrees (i) to comply with all applicable laws, rules and regulations; (ii) to
comply with the Company’s rules, procedures, policies, requirements, and directions; and (iii)
not to engage in any other business or employment without the written consent of the Company
except as otherwise specifically provided herein.
	 
	(d)	 	Executive acknowledges that he has received a copy of the Company’s Code of Ethics, that he
has read the Code of Ethics and that this Agreement does not supersede that policy.




 









 












	4.	 	Compensation and Benefits.
	 
	(a)	 	Base Salary. During the Employment Term, the Company shall pay Executive a base salary at
the annual rate of $270,000 per year or such higher rate as may be determined annually by the
Company (“Base Salary”). Such Base Salary, less applicable withholdings, shall be
paid in accordance with the Company’s standard payroll practice for executives. The Base
Salary set forth in this Agreement shall be retroactive to May 2, 2008; the difference between
the base salary paid from May 2, 2008 and the Base Salary set forth in this Agreement will be
paid, less applicable withholdings, in the first pay period following execution of this
Agreement.
	 
	(b)	 	Annual Bonus. During the Employment Term, Executive will be eligible to receive an Annual
Bonus each year, as determined in accordance with the Applicable Plan approved by the Company
for executives for such year. The Applicable Plan for 2008 is attached hereto as Appendix A
and the Applicable Plan for 2009 and subsequent years will be determined by the Company at its
sole discretion. The Company has the right to change or eliminate the Applicable Plan at any
time. The Annual Bonus to be paid to Executive in 2009 shall be based on the Company’s
financial performance in 2008, continuing in like progression with the Annual Bonus to be paid
in any year based on the Company’s prior year’s performance. Such Annual Bonus, less
applicable withholdings, shall be paid on the January 1st immediately following the year to
which the Annual Bonus relates, or as soon as administratively practicable thereafter, but no
later than December 31st of such following year. Except as otherwise provided by Section 7,
in order to be eligible to receive payment of any portion of an Annual Bonus, Executive must
be actively employed by the Company on the payment date. Notwithstanding the foregoing,
Executive acknowledges that whether any Annual Bonus is to be paid for a given year and the
amount of that Annual Bonus is completely at the discretion of the Company.
	 
	(c)	 	Incentive Compensation. Executive shall be eligible to participate in and receive incentive
compensation (“Incentive Compensation”) under the Company’s incentive compensation plans
generally made available to other executives at a level commensurate with his position and in
accordance with and subject to the terms of such plans. The Incentive Compensation for 2008
is set forth on Appendix A and the Incentive Compensation for 2009 and subsequent years will
be determined by the Company at its sole discretion. Notwithstanding the foregoing, Executive
acknowledges that the grant of awards under the Company’s incentive compensation plans is
completely at the discretion of the Company.
	 
	(d)	 	Benefit Plans, Fringe Benefits and Vacation. Executive shall be eligible to participate in
any 401(k) savings plan generally made available by the Company to other executives in
accordance with the eligibility requirements of such plans and subject to the terms and
conditions set forth in such plans, except for any pension benefit. Executive shall be
eligible to participate in any health and welfare plans made available to other executives,
including, but not limited to, any medical and dental benefits plan, life insurance plan,
short-term and long-term disability plans, or other executive benefit or fringe benefit plan.
Executive will also be eligible to receive at least four (4) weeks of vacation per calendar
year, accrued and earned on a daily basis, as well as other types of paid time-off




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	 	 	(e.g., holidays, personal days, absence due to illness, etc.) according to the Company’s
vacation and paid time-off policy.






	(e)	 	Housing and Travel Allowance. Executive has affirmed his plan to maintain a residence in the
community served by the Company. To defray the costs to Executive of this additional
residence, and the cost of occasional commutes between his current home and Company offices,
the Company will provide Executive with a Housing and Travel Allowance of $2,000 per month for
the duration of his employment under this Agreement. The Company shall also pay Executive a
tax gross-up benefit on the Housing and Travel Allowance in an amount such that, after the
withholding of all federal and state income and employment taxes with respect to the Housing
and Travel Allowance and the tax gross-up benefit, Executive will be in the same after-tax
economic position that Executive would have been in had the Housing and Travel Allowance not
been subject to such taxes. The Housing and Travel Allowance and tax-gross up benefit for a
given month shall be paid to Executive on the first day of such month, or as soon as
administratively practicable thereafter, but in no event later than the end of that month.
	 
	(f)	 	Expense Reimbursement. The Company shall promptly reimburse Executive for the ordinary and
necessary business expenses incurred by Executive in the performance of the duties under this
Agreement in accordance with the Company’s customary practices applicable to executives,
provided that such expenses are incurred and accounted for in accordance with the Company’s
expense reimbursement policy. Reimbursement shall be made as soon as administratively
practicable following Executive’s submission of the necessary documents and receipts required
under the Company’s expense reimbursement policy, but in no event later than December 31st of
the calendar year following the calendar year in which the expense was incurred.
	 
	(g)	 	Concession. Executive will be provided with paid PDA or mobile phone service for one
electronic device, as well as concession Telephone and Toll Service, DSL Internet Service and
in territory Digital TV service benefits consistent with those available to other executives.
	 
	(h)	 	Indemnification. Executive will be covered by the Company’s standard Director’s and
Officer’s Indemnification Agreement, providing for indemnification consistent with the New
York Business Corporation Law and the Company’s by-laws.
	 
	5.	 	Termination of Employment.




Executive’s employment may be terminated by the Company or by Executive at any time for any reason.
Upon termination, Executive shall be entitled to receive the compensation and benefits described
in Section 7. Executive’s employment will terminate under the following conditions:





	(a)	 	Death. Executive’s employment shall terminate upon Executive’s death.
	 
	(b)	 	Total Disability. The Company may terminate Executive’s employment upon his becoming Totally
Disabled. For purposes of this Agreement, Executive shall be “Totally Disabled” if
Executive is physically or mentally incapacitated so as to render Executive incapable of
performing his usual and customary duties under this Agreement without




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	 	 	reasonable accommodation. Executive’s receipt of disability benefits under the Company’s
long-term disability plan, if any, or receipt of Social Security disability benefits shall
be deemed conclusive evidence of Total Disability for purpose of this Agreement; provided,
however, that in the absence of Executive’s receipt of such long-term disability benefits or
Social Security benefits, the Company may, in its reasonable discretion (but based upon
appropriate medical evidence), determine that Executive is Totally Disabled.






	(c)	 	Termination by the Company for Cause.






	 	(i)	 	The Company may terminate Executive’s employment for Cause at any time after
providing written notice to Executive.
	 
	 	(ii)	 	For purposes of this Agreement, the term “Cause” shall mean any of the
following: (A) conviction of a crime or a nolo contendere plea involving the alleged
commission by Executive of a felony or of a criminal act involving, in the good faith
judgment and sole discretion of the Board, fraud, dishonesty, or moral turpitude; (B)
deliberate and continual refusal to perform employment duties reasonably requested by
the Board after fifteen (15) days’ written notice by certified mail of such failure to
perform, specifying that the failure constitutes cause (other than as a result of
vacation, sickness, illness or injury); (C) fraud or embezzlement as determined by the
Board; (D) gross misconduct or gross negligence in connection with the business of the
Company or an affiliate which has a substantial adverse effect on the Company or the
affiliate; or (E) breach of the terms of the confidentiality, non-solicitation and
non-competition provisions of Section 9.
	 
	 	(iii)	 	Regardless of whether Executive’s employment initially was considered to be
terminated for any reason other than Cause, Executive’s employment will be considered
to have been terminated for Cause for purposes of this Agreement if the Board
subsequently determines that Executive engaged in an act constituting Cause during the
Employment Period or Executive breached the terms of the terms of the confidentiality,
non-solicitation and non-competition provisions of Section 9 after his termination.






	(d)	 	Termination by the Company Without Cause. The Company may terminate Executive’s employment
at any time under this Agreement without Cause after providing written notice to Executive.
	 
	(e)	 	Termination by Executive. Executive may terminate his employment under this Agreement after
providing thirty (30) days’ written notice to the Company.
	 
	(f)	 	Expiration of Initial Term or Renewal Period. In the event that either party gives written
notice of non-renewal of the Initial Term or a Renewal Period, as applicable, pursuant to
Section 2, Executive’s employment shall terminate upon the expiration of the Initial Term or
Renewal Period.




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	6.	 	Return of Property and Information.




Executive agrees that when his employment with the Company ends, he will immediately return to the
Company all property, data, information and knowledge which are in his possession or under his
control, including without limitation all documents, forms, correspondence, financial records and
forecasts, operation manuals, notebooks, reports, proposals, computer programs, software, software
documentation, employee handbooks, supervisor’s manuals, lists of clients and referral sources,
client data, and all copies thereof, relating in any way to the business of the Company, whether
relating to the Company directly or to a client of the Company, made or obtained by Executive
during his employment with the Company, whether or not such data, information, or knowledge
constitute confidential or trade secret information.





	7.	 	Compensation Following Termination of Employment.
	 
	(a)	 	Termination for Any Reason. Upon termination of Executive’s employment for any reason under
this Agreement, Executive (or his designated beneficiary or estate, as the case may be) shall
be entitled to receive the following compensation:






	 	(i)	 	Earned but Unpaid Compensation. The Company shall pay Executive any accrued
but unpaid Base Salary for services rendered through the date of termination, any
appropriately documented and accrued but unpaid expenses required to be reimbursed
under this Agreement, and any unused vacation accrued to the date of termination.
	 
	 	(ii)	 	Other Compensation and Benefits. Except as may be provided under this
Agreement, any benefits to which Executive may be entitled through the date of
Executive’s termination pursuant to the plans, policies and arrangements referred to in
Section 4(d) shall be determined and paid in accordance with the terms of such plans,
policies and arrangements, and except as otherwise provided by this Agreement,
Executive shall have no right to receive any other compensation, or to participate in
any other plan, arrangement or benefit, with respect to future periods after such
termination or resignation.






	(b)	 	Termination by the Company Without Cause not in Connection With a Change in Control. In the
event Executive’s employment is terminated without Cause before a Change in Control (as
defined by Section 7(c)(iii)) or more than twenty-four (24) months after a Change in Control,
if Executive executes the Release and Waiver required by Section 8 and such Release and Waiver
is not revoked on or before the expiration of the revocation period thereof, and Executive has
complied with the return of property and information provision set forth in Section 6, then in
addition to the payments to be made pursuant to Section 7(a), the Company shall also:






	 	(i)	 	Severance Pay. Pay to Executive severance pay in an amount equal to 100% of
his Base Salary in effect as of the date of his termination of employment. Payment of
such severance pay shall be made in a lump sum as soon as administratively practicable
after the date of Executive’s termination (or if required by Section 409A, on the six
(6) month anniversary of his termination),




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	 	 	 	but no later than ninety (90) days thereafter, and not before the expiration of the
revocation period for the Release and Waiver.






	 	(ii)	 	Annual Bonus. Pay to Executive the target amount of the Annual Bonus under the
Applicable Plan for the year in which the termination of Executive’s employment occurs.
Payment of such Annual Bonus shall be made in a lump sum as soon as administratively
practicable after the date of Executive’s termination (or if required by Section 409A,
on the six (6) month anniversary of his termination), but no later than ninety (90)
days thereafter, and not before the expiration of the revocation period for the Release
and Waiver.
	 
	 	(iii)	 	Benefits Continuation. Continue to provide Executive and his family for the
one-year period following Executive’s termination with the health and welfare benefits,
including, but not limited to, benefits under any medical and dental benefits plan,
life insurance plan, short-term and long-term disability plans, or other executive
benefit or fringe benefit plan, which Executive and his family were receiving as of the
date of Executive’s termination. The Company shall provide such benefits at the same
cost to Executive as the cost, if any, charged to Executive for those benefits at the
time of his termination. To the extent that the provision of such benefits at the
Company’s expense during the six (6) month period following Executive’s termination
would violate the requirements of Section 409A, then Executive shall be required to pay
to the Company the Company portion of the cost of such benefits during such six (6)
month period, and the Company shall reimburse Executive for the amounts so paid by
Executive on the six (6) month anniversary of his termination, or as soon as
administratively practicable thereafter, but no later than ninety (90) days thereafter.






	(c)	 	Termination by the Company Without Cause or by Executive for Good Reason in Connection With a
Change in Control.






	 	(i)	 	In the event Executive’s employment is terminated by the Company without Cause,
or by Executive for Good Reason, within the twenty-four (24) month period following a
Change in Control, if Executive executes the Release and Waiver required by Section 8
and such Release and Waiver is not revoked on or before the expiration of the
revocation period thereof, and Executive has complied with the return of property and
information provision set forth in Section 6, then in addition to the payments to be
made pursuant to Section 7(a), but subject to Section 7(c)(iv), the Company shall also:




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	 	(A)	 	Severance Pay. Pay to Executive severance pay in an amount
equal to 150% of his Base Salary at its highest level in effect from the date
of the Change in Control through his termination of employment. Payment of
such severance pay shall be made in a lump sum as soon as administratively
practicable after the date of Executive’s termination (or if required by
Section 409A, on the six (6) month anniversary of his termination), but no
later than ninety (90) days thereafter, and not before the expiration of the
revocation period for the Release and Waiver.
	 
	 	(B)	 	Annual Bonus. Pay to Executive 150% of the target amount of
the Annual Bonus under the Applicable Plan for the year in which the
termination of Executive’s employment occurs. Payment of such Annual Bonus
shall be made in a lump sum as soon as administratively practicable after the
date of Executive’s termination (or if required by Section 409A, on the six (6)
month anniversary of his termination), but no later than ninety (90) days
thereafter, and not before the expiration of the revocation period for the
Release and Waiver.
	 
	 	(C)	 	Equity Vesting Acceleration. Accelerate the vesting of and the
lapsing of restrictions on any unvested or restricted equity compensation
(e.g., stock options, restricted stock, etc.).
	 
	 	(D)	 	Benefits Continuation. Continue to provide Executive and his
family for the one-year period following Executive’s termination with the
health and welfare benefits, including, but not limited to, benefits under any
medical and dental benefits plan, life insurance plan, short-term and long-term
disability plans, or other executive benefit or fringe benefit plan, which
Executive and his family were receiving as of the date of Executive’s
termination. The Company shall provide such benefits at the same cost to
Executive as the cost, if any, charged to Executive for those benefits at the
time of his termination. To the extent that the provision of such benefits at
the Company’s expense during the six (6) month period following Executive’s
termination would violate the requirements of Section 409A, then Executive
shall be required to pay to the Company the Company portion of the cost of such
benefits during such six (6) month period, and the Company shall reimburse
Executive for the amounts so paid by Executive on the six (6) month anniversary
of his termination, or as soon as administratively practicable thereafter, but
no later than ninety (90) days thereafter.






	 	(ii)	 	“Good Reason.” For purposes of this Agreement, the term “Good Reason”
shall mean the occurrence of any of the following in connection with a Change in
Control, without Executive’s express written consent: (A) the assignment of duties to
Executive materially inconsistent with Executive’s current authorities, duties,
responsibilities and status; (B) any reduction in Executive’s title, position, or
reporting lines; (C) the relocation of Executive to an office or location more than
seventy-five (75) miles from the office or location of Executive’s work as of




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	 	 	 	the date of the Change in Control; (D) requiring Executive to travel on Company
business to a substantially greater extent than required as of the date of the
Change in Control; or (E) the reduction in Executive’s Base Salary as in effect on
the date of the Change in Control.






	 	(iii)	 	“Change in Control.” For purposes of this Agreement, the term “Change in
Control” shall mean the happening of any of the following:






	 	(A)	 	Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) (a “Person”) becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of either (1) the then outstanding common shares of the Company (the
“Outstanding Company Common Shares”) or (2) the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that such beneficial ownership shall not
constitute a Change in Control if it occurs as a result of any of the following
acquisitions of securities: (I) any acquisition directly from the Company,
(II) any acquisition by the Company or any corporation, partnership, trust or
other entity controlled by the Company (a “Subsidiary”), (III) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary, (IV) any acquisition by an
underwriter temporarily holding Company securities pursuant to an offering of
such securities, (V) any acquisition by an individual, entity or group that is
permitted to, and actually does, report its beneficial ownership on Schedule
13-G (or any successor schedule); provided that, if any such individual, entity
or group subsequently becomes required to or does report its beneficial
ownership on Schedule 13D (or any successor schedule), then, for purposes of
this paragraph, such individual, entity or group shall be deemed to have first
acquired, on the first date on which such individual, entity or group becomes
required to or does so report, beneficial ownership of all of the Outstanding
Company Common Stock and Outstanding Company Voting Securities beneficially
owned by it on such date, or (VI) any acquisition by any corporation pursuant
to a reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in clauses
(1), (2) and (3) of Section 7(c)(iii)(C) are satisfied. Notwithstanding the
foregoing, a Change in Control shall not be deemed to occur solely because any
Person (the “Subject Person”) became the beneficial owner of 25% or
more of the Outstanding Company Common Shares or Outstanding Company Voting
Securities as a result of the acquisition of Outstanding Company Common Shares
or Outstanding Company Voting Securities by the Company which, by reducing the
number of Outstanding Company Common Shares or Outstanding Company Voting
Securities, increases the proportional number of shares beneficially owned by
the Subject Person; provided, that if a Change in




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	 	 	 	Control would be deemed to have occurred (but for the operation of this
sentence) as a result of the acquisition of Outstanding Company Common
Shares or Outstanding Company Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes the
beneficial owner of any additional Outstanding Company Common Shares or
Outstanding Company Voting Securities which increases the percentage of the
Outstanding Company Common Shares or Outstanding Company Voting Securities
beneficially owned by the Subject Person, then a Change in Control shall
then be deemed to have occurred; or






	 	(B)	 	Individuals who, as of the date of this Agreement, constitute
the Board (the “Incumbent Board”) cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board, including by reason of agreement intended to
avoid or settle any such actual or threatened contest or solicitation; or
	 
	 	(C)	 	The consummation of a reorganization, merger, statutory share
exchange, consolidation, or similar corporate transaction involving the Company
or any of its direct or indirect Subsidiaries (each a “Business
Combination”). in each case, unless, following such Business Combination,
(1) the Outstanding Company Common Shares and the Outstanding Company Voting
Securities immediately prior to such Business Combination, continue to
represent (either by remaining outstanding or being converted into voting
securities of the resulting or surviving entity or any parent thereof) more
than 50% of the then-outstanding shares of common stock and the combined voting
power of the then-outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting
from Business Combination (including, without limitation, a corporation that,
as a result of such transaction, owns the Company or all or substantially all
of the Company’s assets either directly or through one or more subsidiaries),
(2) no Person (excluding the Company, any employee benefit plan (or related
trust) of the Company, a Subsidiary or such corporation resulting from such
Business Combination or any parent or a subsidiary thereof, and any Person
beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 25% or more of the Outstanding Company
Common Shares or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from




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	 	 	 	such Business Combination (or any parent thereof) or the combined voting
power of the then outstanding voting securities of such corporation entitled
to vote generally in the election of directors, and (3) at least a majority
of the members of the board of directors of the corporation resulting from
such Business Combination (or any parent thereof) were members of the
Incumbent Board at the time of the execution of the initial agreement or
action of the Board providing for such Business Combination; or






	 	(D)	 	The consummation of the sale, lease, exchange or other
disposition of all or substantially all of the assets of the Company, unless
such assets have been sold, leased, exchanged or disposed of to a corporation
with respect to which following such sale, lease, exchange or other disposition
(1) more than 50% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then outstanding
voting securities of such corporation (or any parent thereof) entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Shares and Outstanding Company Voting Securities immediately prior to such
sale, lease, exchange or other disposition in substantially the same
proportions as their ownership immediately prior to such sale, lease, exchange
or other disposition of such Outstanding Company Common Shares and Outstanding
Company Voting Shares, as the case may be, (2) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company or a Subsidiary
of such corporation or a subsidiary thereof and any Person beneficially owning,
immediately prior to such sale, lease, exchange or other disposition, directly
or indirectly, 25% or more of the Outstanding Company Common Shares or
Outstanding Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of such corporation (or any parent thereof) and the
combined voting power of the then outstanding voting securities of such
corporation (or any parent thereof) entitled to vote generally in the election
of directors, and (3) at least a majority of the members of the board of
directors of such corporation (or any parent thereof) were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale, lease, exchange or other disposition of
assets of the Company; or
	 
	 	(E)	 	Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.






	 	(iv)	 	Potential Section 280G Adjustment. In the event that any amount or benefit to
be paid or provided to Executive pursuant to Section 7(c)(i), taken together with any
amounts or benefits otherwise paid or provided to Executive by the Company




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	 		 	or any affiliated company (collectively, the “Covered Payments”), would be
an “excess parachute payment,” as defined in Section 280G of the Code and the
related Treasury Regulations and other guidance issued thereunder, and would thereby
subject Executive to the tax imposed under Section 4999 of the Code (the “Excise
Tax”), then the Company shall either (A) make the Covered Payment to Executive
without adjustment and subject to the Excise Tax, or (B) reduce the Covered Payments
to the maximum amount that may be paid without Executive becoming subject to the
Excise Tax (such reduced amount, the “Payment Cap”), whichever provides the
greater net after-tax benefit to Executive. In the event that the reduction of the
Covered Payments will provide Executive with the greater net after-tax benefit,
Executive shall have the right to designate which of the payments and benefits
otherwise provided for in Section 7(c)(i) that he will receive in connection with
the application of the Payment Cap.






	(d)	 	Termination of Employment. For purposes of this Section 7, the term “termination of
employment” and words of similar import shall mean a “separation from service” as defined
by Section 409A, and this Section 7 shall be interpreted and administered consistent with such
definition.






	(e)	 	No Mitigation; No Set-Off Against Severance Benefits. Executive shall not be required to
mitigate damages or the amount of any payment or benefits provided for under Section 7 by
seeking other employment or otherwise, nor shall the amount of any payment or benefits
provided for in Section 7 be reduced by any compensation earned by Executive as a result of
employment by another employer after the date of termination of Executive’s employment with
the Company, except as otherwise provided by the confidentiality, non-solicitation and
non-competition provisions of Section 9. In addition, the Company’s obligations under this
Agreement shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Executive.






	8.	 	Release and Waiver.






	(a)	 	In exchange for the additional consideration under Section 7 to which Executive would not
otherwise be entitled, Executive shall generally and completely release the Company, its
subsidiaries and affiliates, and its directors, officers, executives, shareholders, partners,
agents, attorneys, predecessors, successors, insurers and assigns from any and all claims,
liabilities and obligations, both known and unknown, that arise out of or are in any way
related to events, acts, conduct, or omissions occurring at any time prior to or at
Executive’s termination. Such general release shall include, but shall not be limited to:
(i) all claims arising out of or in any way related to Executive’s employment with the Company
or the termination of that employment; (ii) all claims related to Executive’s compensation or
benefits from the Company, including salary, bonuses, incentive compensation, vacation pay,
expense reimbursements, severance pay, fringe benefits, stock, stock options, restricted
stock, or any other ownership or equity interests in the Company, or its subsidiaries or
affiliates under all State and federal statutes such as the Fair Labor Standards Act, the
Family and Medical Leave Act, the Employee Retirement and Income Security Act, the New York
Labor Law and any similar State or local statute,




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	 	 	regulation or order; (iii) all claims for breach of contract, wrongful termination, and
breach of the implied covenant of good faith and fair dealing; (iv) all tort claims,
including claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (v) all federal, state, and local statutory claims, including claims for
discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under, for
example, the Age Discrimination in Employment Act (the “ADEA”), Title VII of the
Civil Rights Act of 1964, as amended, the Rehabilitation Act of 1973, the Americans With
Disabilities Act, the Equal Pay Act, the Family Medical Leave Act, the New York Human Rights
Law and any similar State or local statute, regulation or order. Notwithstanding the
foregoing, Executive shall not be required to release the Company or its subsidiaries or
affiliates from: (A) any obligation to indemnify Executive pursuant to the articles and
bylaws of the Company, any valid fully executed indemnification agreement with the Company,
any applicable directors and officers liability insurance policy, and applicable law; or (B)
any obligations to make payments to Executive under Section 7. Executive shall be required
to represent that he has no lawsuits, claims or actions pending in his name, or on behalf of
any other person or entity, against the Company or its subsidiaries or affiliates, or any
other person or entity subject to the release to be granted under this Section.






	(b)	 	Executive shall acknowledge that: (i) he is knowingly and voluntarily waiving and releasing
any rights he may have under the ADEA; (ii) that the consideration given for the waiver and
release (i.e., the additional consideration to be provided under Section 7) is in addition to
anything of value to which he is already entitled; and (iii) that he has been advised, as
required by the ADEA, that: (A) his waiver and release does not apply to any rights or claims
that may arise after the date that he signs such release; (B) he should consult with an
attorney prior to signing the release (although he may choose voluntarily not to do so); (C)
he has twenty-one (21) days from the date he receives the proposed release to consider the
release (although he may choose voluntarily to sign it earlier); (D) he has seven (7) days
following the date he signs the release to revoke the release by providing written notice of
his revocation to the Board; and (E) the release will not be effective until the date upon
which the revocation period has expired, which will be the eighth day after the date that the
release is signed by Executive.






	(c)	 	The claims included in this release and waiver do not include vested rights, if any, under
any qualified retirement plan in which Executive participates, and his COBRA, unemployment
compensation and worker’s compensation rights, if any. Nothing in this release shall be
construed to constitute a waiver of: (i) any claims Executive may have against the Company
that arise from acts or omissions that occur after the effective date of this Release; (ii)
Executive’s right to file an administrative charge with any governmental agency concerning the
termination of that employment; or (iii) Executive’s right to participate in any
administrative or court investigation, hearing or proceeding. Executive agrees, however, to
waive and release any right to receive any individual remedy or to recover any individual
monetary or non-monetary damages as a result of any such administrative charge or proceeding.
In addition, this release does not affect Executive’s rights as expressly created by this
Agreement, and does not limit his ability to enforce this Agreement.




Page 12 of 18









 












	9.	 	Executive Covenants.






	(a)	 	Non-Disclosure of Confidential Information and Trade Secrets.






	 	(i)	 	During the course of Executive’s employment with the Company, Executive will
acquire and have access to Confidential Information and Trade Secrets belonging to the
Company, its affiliates, subsidiaries, divisions and joint ventures (collectively
referred to as the “Company” throughout and for purposes of this Section 9). Such
Confidential Information and Trade Secrets include, without limitation, business and
technical information, whatever its nature and form and whether obtained orally, by
observation, from written materials or otherwise, as for example: (A) financial and
business information, such as information with respect to costs, commissions, fees,
profits, profit margins, sales, markets, mailing lists, accounts receivables and
accounts payables, pricing strategies, strategies and plans for future business, new
business, product or other development, potential acquisitions or divestitures, and new
marketing ideas; (B) marketing information, such as information on markets, end users
and applications, the identity of the Company’s customers, vendors, suppliers, and
distributors, their names and addresses, the names of representatives of the Company’s
customers, vendors, distributors or suppliers responsible for entering into contracts
with the Company, the Company’s financial arrangements with its distributors and
suppliers, the amounts paid by such customers to the Company, specific customer needs
and requirements, leads and referrals to prospective customers; and (C) personnel
information, such as the identity and number of the Company’s employees, personal
information such as social security numbers, skills, qualifications, and abilities.
Executive acknowledges and agrees that the Confidential Information and Trade Secrets
are not generally known or available to the general public, but have been developed,
complied or acquired by the Company at its great effort and expense and for commercial
advantage and, therefore, takes every reasonable precaution to prevent the use or
disclosure of any part of it by or to unauthorized persons. Confidential Information
and Trade Secrets can be in any form or media, whether oral, written or machine
readable, including electronic files.
	 
	 	(ii)	 	Executive agrees he will not, while associated with the Company and for so long
thereafter as the pertinent information or documentation remains confidential, directly
or indirectly use, disclose or disseminate to any other person, organization or entity
or otherwise use any Confidential Information and Trade Secrets, except as specifically
required in the performance of Executive’s duties on behalf of the Company or with
prior written authorization from the Board.






	(b)	 	Non-Solicitation of Customers. Executive acknowledges and agrees that during the course of
and solely as a result of employment with the Company, he will come into contact with some,
most or all of the Company’s customers and will have access to Confidential Information and
Trade Secrets regarding the Company’s customers, distributors and suppliers. Consequently,
Executive covenants and agrees that in the event of the termination of his employment, whether
such termination is voluntary or involuntary, Executive will not, for a period of twelve (12)
months following such




Page 13 of 18









 






	 	 	termination, directly or indirectly, solicit or initiate contact with any customer, former
customer or prospective customer of the Company for the purpose of selling products or
services to the customer competitive with the products or services purchased by the customer
from the Company. This restriction shall apply to any customer, former customer or
prospective customer of the Company with whom Executive had contact or about whom Executive
obtained Confidential Information or Trade Secrets during his employment with the Company.
For the purposes of this Section, “contact” means interaction between Executive and
the customer or then prospective customer which takes place to further the business
relationship, or making sales to our performing services for the customer or prospective
customer on behalf of the Company. This restriction will not apply when a former employee
who is not working in a competitive capacity responds to a request for proposal on behalf of
his new employer who is not engaged in the same or similar businesses as the Company.






	(c)	 	Non-Compete. Executive acknowledges that his services are special and unique, and
compensation is partly in consideration of and conditioned upon Executive not competing with
Company, and that a covenant on Executive’s part not to compete is essential to protect the
business and good will of the Company. Accordingly, except as hereinafter provided, Executive
agrees that for twelve (12) months after the termination of his employment, Executive shall
not be engaged or interested as a director, officer, stockholder (except as provided herein),
employee, partner, individual proprietor, lender or in any other capacity, in any business,
which competitive with the business of the Company as conducted at the time of Executive’s
termination and which involves Executive’s knowledge, actions or assistance within the
counties of Westchester, Rockland, Ulster, Orange, Duchess and Sullivan in New York and
Sussex, Bergen and Passaic in New Jersey; however, this restriction will not apply to new
kinds of business in which Executive may engage in the future, after such termination, unless
Executive has been actively engaged in the development or otherwise involved in such business
while an employee of the Company. In addition, Executive agrees that for this same twelve
(12) months, he shall not recruit or recommend any other person who is or was an employee of
the Company while Executive was also an employee, to any business which is competitive with
the business of Executive as conducted at the time of Executive’s termination and which
involves Executive’s knowledge, actions or assistance within the counties of Westchester,
Rockland, Ulster, Orange, Duchess and Sullivan in New York and Sussex, Bergen and Passaic in
New Jersey. Nothing herein shall prohibit Executive from investing in any securities of any
corporation which is in competition with the Company, whose securities are listed on a
national exchange or traded in the over-the-counter market if Executive shall own less than 5%
of the outstanding securities of such operation.






	(d)	 	Enforcement of Covenants. Executive acknowledges and agrees that compliance with the
covenants set forth in this Section 9 is necessary to protect the Confidential Information and
Trade Secrets, business and goodwill of the Company, and that any breach of this Section 9
will result in irreparable and continuing harm to the Company, for which money damages may not
provide adequate relief. Accordingly, in the event of any breach or anticipatory breach of
Section 9 by Executive, the Company and Executive agree that the Company shall be entitled to
the following particular forms of relief as a




Page 14 of 18









 






	 	 	result of such breach, in addition to any remedies otherwise available to it at law or
equity: (i) injunctions, both preliminary and permanent, enjoining or restraining such
breach or anticipatory breach, and Executive hereby consents to the issuance thereof
forthwith and without bond; and (ii) recovery of all reasonable sums and costs, including
attorneys’ fees, incurred by the Company to enforce the provisions of this Section 9.






	10.	 	Withholding of Taxes




The Company shall withhold from any compensation and benefits payable under this Agreement all
applicable federal, state, local or other taxes.





	11.	 	No Claim Against Assets.




Nothing in this Agreement shall be construed as giving Executive any claim against any specific
assets of the Company or as imposing any trustee relationship upon the Company in respect of
Executive. The Company shall not be required to establish a special or separate fund or to
segregate any of its assets in order to provide for the satisfaction of its obligations under this
Agreement. Executive’s rights under this Agreement shall be limited to those of an unsecured
general creditor of the Company and its affiliates.





	12.	 	Executive Acknowledgement.




Executive acknowledges that he has had the opportunity to discuss this Agreement with and obtain
advice from his private attorney, has had sufficient time to and has carefully read and fully
understands all of the provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.





	13.	 	Successors and Assignment.







	(a)	 	Except as otherwise provided in this Agreement, this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, representatives, successors
and assigns.






	(b)	 	The Company shall require any successor or successors (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to Executive, to
acknowledge expressly that this Agreement is binding upon and enforceable against the Company
in accordance with the terms hereof, and to become jointly and severally obligated with the
Company to perform this Agreement in the same manner and to the same extent that the Company
would be required to perform if no such succession or successions had taken place. Failure of
the Company to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement by the Company.






	(c)	 	The rights and benefits of Executive under this Agreement are personal to him and no such
right or benefit shall be subject to voluntary or involuntary alienation, assignment or
transfer; provided, however, that nothing in this Section 13 shall preclude Executive from
designating a beneficiary or beneficiaries to receive any benefit payable on his death.




Page 15 of 18









 












	14.	 	Entire Agreement; Amendment.




This Agreement shall supersede any and all existing oral or written agreements, representations, or
warranties between Executive and the Company (or any of its subsidiaries or affiliated entities)
relating to the terms of Executive’s employment, except for the Company’s Code of Ethics and the
Director’s and Officer’s Indemnification Agreement. This Agreement may not be amended except by a
written agreement signed by both parties.





	15.	 	Governing Law.




This Agreement shall be governed by and construed in accordance with the domestic substantive laws
of the State of New York, without giving effect to any conflicts or choice of laws rule or
provision that would result in the application of the domestic substantive laws of any other
jurisdiction.





	16.	 	Section 409A.




The parties intend that this Agreement and the payments and benefits to be provided hereunder
satisfy the requirements of Section 409A, and this Agreement shall be administered and interpreted
consistent with such intention.





	17.	 	Notices.




Any notice, consent, request or other communication made or given in connection with this Agreement
shall be in writing and shall be deemed to have been duly given when delivered or mailed by
registered or certified mail, return receipt requested, or by facsimile or by hand delivery, to
those listed below at their following respective addresses or at such other address as each may
specify by notice to the others:





To the Company:




Warwick Valley Telephone Company

Attention: Director of Human Resources

47 Main Street

Warwick, New York 10990





To Executive:




At the address set forth below




	18.	 	Miscellaneous.






	(a)	 	Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement
on any occasion shall not be considered a waiver thereof or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of this Agreement.




Page 16 of 18









 












	(b)	 	Severability. If any term or provision of this Agreement is declared illegal or
unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable,
such term or provision shall immediately become null and void, leaving the remainder of this
Agreement in full force and effect.






	(c)	 	Headings. Section headings are used herein for convenience of reference only and shall not
affect the meaning of any provision of this Agreement.






	(d)	 	Rules of Construction. Whenever the context so requires, the use of the singular shall be
deemed to include the plural and vice versa.






	(e)	 	Authority to Enter into this Agreement. The officer of the Company whose signature appears
below has been authorized to enter into this Agreement on behalf of the Company.






	(f)	 	Counterparts. This Agreement may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, and such counterparts will together constitute but
one agreement.




IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year set
forth below.




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	WARWICK VALLEY TELEPHONE COMPANY	 	 	 	EXECUTIVE	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Robert J. DeValentino	 	 	 	By:	 	/s/ Duane W. Albro	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Printed Name:
	 	Robert J. DeValentino
	 	 	 	 	 	Printed Name:
	 	 Duane W. Albro	 	 
	 

	 	Title:
	 	Chairperson — Compensation Committee	 	 	 	 	 	 	 	 	 	 
	 
	Date:

	 	 May 29, 2008
	 	 	 	 	 	Date:
	 	May 27, 2008	 	 	 	 






Page 17 of 18









 






APPENDIX A




2008 Annual Bonus





Target Amount: 50% of base salary ($135,000)




Actual Bonus Payout = Target Bonus ($135,000) x Total Payout Factor




Methodology:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Metric	 	Weighting	 	Result	 	Target	 	Actual / Target	 	Payout Factor
	 	 	A	 	B	 	C	 	(B / C)	 	A x (B / C)
	Revenue
	 	 	0.25	 	 	TBD	 	$	26,406,000	 	 	TBD	 	TBD
	EBITDA
	 	 	0.25	 	 	TBD	 	$	4,832,000	 	 	TBD	 	TBD
	Free Cash Flow
	 	 	0.25	 	 	TBD	 	$	1,479,000	 	 	TBD	 	TBD
	Net Income
	 	 	0.25	 	 	TBD	 	$	5,363,000	 	 	TBD	 	TBD
	Total
	 	 	1.00	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Total Payout Factor






2008 Incentive Compensation





Stock Options:            45,500




Restricted Shares:        9,000




Page 18 of 18